Summary The skin epithelium provides essential protective and sensory functions for the body. It consists of the epidermis, which serves as a barrier, the hair follicles, which are important for thermal protection, and the Merkel cells, which are innervated mechanosensory cells that mediate light touch sensations for texture and shape recognition. While the development and homeostasis of the epidermis and hair follicles have been well studied, the biology of the Merkel cells is not as well understood. Much of our knowledge on the mechanisms controlling Merkel cells comes from the analysis of murine dorsal skin, in which Merkel cells are organized in crescent-shaped structures called touch domes, and are located around primary hair follicles. Our recent studies revealed close relationship between hair follicle and Merkel cell development, as genetic mutations that abrogate early stages of hair formation in the mouse also result in the loss of Merkel cells. We further investigated this phenomenon and, by performing lineage tracing experiments, we showed that Sox9+ embryonic hair follicle stem cells, which are known to give rise to the hair follicles and adult hair follicle stem cells, also give rise to Merkel cells. We also dissected the mechanisms controlling the specification of Sox9+ cells to the Merkel cell lineage and showed the importance of fibroblast growth factor (Fgf) signaling in this process. Indeed, we found that epidermal loss of Fgf receptor 2 (FgfR2) prior to hair morphogenesis does not affect the appearance of Sox9+ cells or the development of the hair follicles, but leads to loss of Merkel cells. Taken together, we hypothesize that Sox9+ cells are embryonic multipotent stem cells that give rise to both the hair follicle and Merkel cell lineages, and FgfR2-mediated signaling functions to promote the differentiation of Sox9+ cells into Merkel cells. This competitive renewal will focus on testing the above hypothesis. In Aim 1, we will test the significance of Sox9+ cells for Merkel cell formation. We will perform in vivo lineage tracing and ex vivo live imaging assays to confirm that Sox9+ cells are Merkel cell precursors. We will also perform conditional ablation of the transcription factor Sox9, which is known to be essential for the maintenance of Sox9+ embryonic hair follicle stem cells, and analyze the effect on Merkel cell formation. In Aim 2, we will investigate the molecular mechanisms of FgfR2-mediated control of Merkel cell development. We will identify FgfR2-mediated intracellular signaling pathways that are critical for Merkel cell formation by analyzing an allelic series of conditional mouse mutants of fgfr2 that prevent the binding of effector proteins. We will next select candidate transcriptional factors that execute Fgfr2 transcriptional responses and test their significance for Merkel cell formation. In summary, these studies will define the dynamic interplay between signaling and transcriptional processes in the control of Merkel cell fate determination.